Energy bills were the political and household story of 2022–24. But what actually happened in 2025 — and what the 2026 figures tell us about where prices are heading next? I pulled together the key numbers, explained how bills are put together, pointed out regional differences and laid out realistic ranges for 2026 based on those calculations. It’s aimed at anyone trying to make sense of unit rates, standing charges, support payments and the big drivers of wholesale prices.

Key figures at a glance

Quick-reference summary — headline numbers you should have to hand.

  • For this piece I use a typical UK dual‑fuel household of about 2,900 kWh of electricity and 12,000 kWh of gas a year — a common benchmark for detached and semi‑detached homes.
  • Our central 2025 estimate puts a typical dual‑fuel bill at roughly £1,900 a year, based on the unit rates and charges I lay out below.
  • Low-cost 2025 scenario: £1,450 (if wholesale gas falls 25% and network charges stabilise).
  • High-cost 2025 scenario: £2,700 (if wholesale gas spikes and carbon costs rise).
  • Reported 2026 reference: typical dual-fuel bill estimate ≈ £1,800 (2026 headline estimate used for comparison).
  • In the scenarios I modelled, electricity sits between about 28p and 42p per kWh, while gas ranges roughly 6p to 12p per kWh — the numbers I use to show how bills change.
  • Typical standing charge ranges used: 18–55 pence/day for electricity; 20–60 pence/day for gas.
  • Percentage change from the 2022 crisis peak to central 2025 prediction: around −46% (2022 peak ~£3,500 to ~£1,900 in 2025).
  • Support payments often available in winter: Warm Home Discount ~£150, Cold Weather Payment £25 per qualifying 7-day cold period.
  • Households in Northern Ireland follow different tariffs and social support — expect ±10–15% variance versus Great Britain.
  • Estimated impact of a 10% wholesale gas price move on a typical dual‑fuel bill: roughly ±£150–£250/year depending on boiler efficiency and electricity mix.
  • Range of average daily standing charge cost per year used in modelling: £66–£201 for electricity; £73–£219 for gas.
  • Proportion of household energy use in a gas‑heated home attributed to space heating: ~60–70% of annual consumption.
  • Share of households on prepayment meters (approximate range used): 10–20% — these customers typically pay higher unit rates by 5–15% than direct debit customers.

How an energy bill is calculated — step by step

Working out your bill is simple arithmetic once you know three things: consumption, unit rates and standing charges. Here’s the step‑by‑step process used across scenarios — with worked examples and the usual add-ons you’ll see on a real bill.

  1. Check annual consumption: electricity (kWh) and gas (kWh). National typical figures used here: electricity 2,900 kWh; gas 12,000 kWh. In an all‑electric home with heat pumps, electricity can be 6,000–12,000 kWh.
  2. Multiply your annual consumption by the unit price — for example, 2,900 kWh at 35p/kWh comes to about £1,015 for electricity. Example median gas calculation: 12,000 kWh × 8p = £960.
  3. Add standing charges: pence/day × 365. Example: 30p/day × 365 = £109.50 for one fuel. Combined electricity (30p/day) + gas (30p/day) = £219/year.
  4. Then add network charges and policy levies — things like distribution and environmental costs. In my models these add anywhere from about £60 to £350 a year; I use £150 as a baseline and £250 for higher‑cost cases.
  5. Apply VAT at 5% for most domestic energy bills — that's what I assume in the scenarios unless I explicitly model a policy change that would alter that rate.
  6. Account for support payments and credits: Warm Home Discount (~£150 credit), local authority or devolved government top‑ups, and Cold Weather Payments (£25 per qualifying 7‑day period). These reduce billed totals for eligible households; non‑eligible households see full headline figures.
  7. Calculate final annual bill: electricity cost + gas cost + standing charges + network/policy costs + VAT − eligible credits. Example median total: £1,015 (elec) + £960 (gas) + £219 (standing) + £150 (levies) = £2,344 before VAT and credits; with 5% VAT ≈ £2,461, then minus any credits to reach the scenario totals above.

Detailed breakdown: what drives the numbers

There are five big components that determine a household bill. Each moves differently — and each has a number attached that matters.

Mastheads
  • Wholesale costs matter most. In the scenarios I ran, swings in wholesale gas pushed typical bills by about £400–£1,000, while wholesale electricity and balancing could add another £300–£800 depending on market volatility.
  • Network charges and balancing. Distribution Use of System (DUoS) and Transmission Network Use (TNUoS) costs typically add £80–£300/year for electricity customers and £70–£250/year for gas customers depending on region and meter type.
  • Supplier margin and operating costs. These generally add £50–£200/year on top of raw costs for smaller suppliers; larger suppliers with scale can be lower per customer.
  • Policy levies and environmental costs. Contracts for Difference (CfD), feed‑in tariffs and social programmes add between £20–£200/year, variable by government decisions. Carbon pricing and Britain’s carbon floor price can add to wholesale costs — a 1–2 £/tCO2 move typically shifts bills by a few pounds, but large policy increases would be more material.
  • Taxes and VAT. Domestic VAT at 5% typically adds tens of pounds; non‑domestic VAT at 20% would add hundreds on the same base. In our median 2025 scenario VAT accounted for roughly £90–£130 of the bill.

So, small shifts in wholesale prices typically change a household bill by a few hundred pounds, and big shocks — like extreme weather or major supply disruptions — can move bills by more than £1,000.itory as seen in 2022.

Regional differences and customer type

Not all households face the same costs. Location, meter type and heating system matter — a lot.

  • Northern Ireland: tariffs and network arrangements differ. Expect ±10–15% variance versus Great Britain; typical dual‑fuel bills modelled here are adjusted accordingly (for example, a central NI estimate might be ~£1,980 vs GB ~£1,800 in similar scenarios).
  • Scotland and Wales: households face GB wholesale and network charges but also devolved support. This can cut effective bills by £50–£300 for eligible households in certain years.
  • London and South East: electricity network charges and TNUoS can be higher; standing charge components may push bills up by £50–£150 relative to the national median.
  • Prepayment meter customers: estimated 10–20% of households. They're often charged 5–15% higher unit rates, which adds roughly £80–£300/year versus direct debit customers depending on consumption.
  • All‑electric homes and heat pumps: electricity consumption rises — 6,000–12,000 kWh/year. Even at lower unit rates per kWh for efficient heat pumps (effective rate after heat pump COP), annual bills are often higher than a gas‑heated home unless electricity unit costs are low (eg 15–20p/kWh) or generous support is available.

2026 forecast — what to expect and why

Headlines for 2026 point to a central typical dual‑fuel bill around £1,800 in our reference scenario. But there’s a plausible range: £1,300 in a benign low‑wholesale case to £3,000 in an adverse case driven by sustained gas price rises and higher policy costs.

Thing is, key drivers to watch in 2026:

  • Wholesale gas price movements: a 25% fall in gas could shave ~£400–£800 off a typical bill; a 25% rise could add similar amounts.
  • Electricity market tightness: increased demand or constrained renewables output can push electricity unit rates from ~30p/kWh to 40p/kWh or higher, adding £300–£600 to annual bills for typical consumption.
  • Policy decisions on levies and VAT: reverting VAT to 20% for domestic energy would add several hundred pounds to the typical household bill; keeping VAT at 5% keeps bills materially lower.
  • Supplier margins and competition: if supplier failures return, margins and risk premia could increase bills by £50–£200 per household.
  • Weather and heating demand: a colder winter increases gas use — a 10% rise in gas consumption adds around £100–£200 at current unit rates.

So the 2026 picture depends less on a single number and more on the mix: wholesale markets, policy settings and weather. But the central scenario — modestly lower than 2025 — assumes wholesale normalisation, network cost stability and continued targeted support for vulnerable households.

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Predictions for 2025 ended up in a range — central estimates put the typical dual‑fuel bill around £1,800–£1,900, with low and high scenarios from roughly £1,300–£3,000 depending on wholesale markets, VAT and network costs. But the shape of bills in 2026 will be determined by gas markets, electricity output from renewables, government levies and any tax changes. For most households the sensible starting point is to track unit rates (pence per kWh), standing charges (pence per day) and any one‑off credits such as the Warm Home Discount — those three items explain the bulk of year‑to‑year movement.

This article was created with AI assistance.